Americas Data Center H2 2024 Update

PHOENIX AMERICAS PRIMARY MARKET

GLENDALE

KEY INDICATORS*

1,541MW In Operation

669MW 2024 Colo Leasing

GOODYEAR

PHOENIX CBD

MESA

478MW Under Construction

2.5% Colo Vacancy

CHANDLER

Colo

Hyperscale Self-build

*Definition: Key indicators are based on operational Hyperscale Cloud, Colo, Edge & Telco data centre facilities in the market and excludes Captive & ICT.

MARKET OVERVIEW Demand for data center space in Phoenix has shown no sign of slowing down, with colocation leasing and preleasing activity increasing over the last three years. In 2022, the market saw a record 411MW in colocation leasing activity, which was topped by 643MW in 2023, and 669MW in 2024. Currently, the Phoenix colocation market has 24MW of available capacity, the largest block being 9MW. Like other established data center markets in the U.S., strong demand and limited availability have led wholesale occupiers looking to turn to planned and under-construction data centers to meet their needs, as reflected by the 84% prelease rate for data centers under construction across the Phoenix metro area. The planned pipeline signals years of development, with 4.7GW of capacity waiting to be built, 949MW of which is already committed. Vacancy in this market, at 2.5%, is very low, just like other high-performing established markets across the country. While it symbolizes the tightness of the market, it doesn’t fully capture how tight the market is for hyperscalers and wholesale colocation occupiers that often have needs that are larger than what is currently available. However, retail occupiers, which often have capacity needs that are less than 1MW, can still find space, with 12 data centers operated by well-known providers offering individual availabilities ranging from 200kW to 9.0MW. The Phoenix market’s appeal is bolstered by its proximity to Southern California, cost advantages over nearby markets, favorable Arizona incentives, low natural disaster risk, desert environment, and strong fiber infrastructure. These factors have led to the region’s 1.5GW of operational capacity and a healthy development pipeline. However, concerns about power demands and noise pollution have led cities like Mesa, Chandler and Phoenix to limit new development, resulting in increased land acquisition activity by hyperscalers and wholesalers in the western part of the metro, including Goodyear, Avondale, Peoria and El Mirage.

ECOSYSTEM DEVELOPMENTS •

Mesa, Chandler and Phoenix stopped inviting new data center developments due to concerns about power demands and noise pollution. As a result, new projects are focusing on the western suburbs like Peoria, El Mirage and Laveen Village, strengthening the Greater Phoenix area as a key data center hub. • Phoenix's power and water usage are under scrutiny due to high absorption rates, prompting SRP and APS to ask providers to run generators during peak usage times to prevent brownouts, despite concerns about ESG and PUE scores. • Land acquisition activity in the Phoenix market has surged in the second half of 2024, with notable transactions including Amazon’s purchase of 218 acres in Laveen Village, Aligned purchasing 95 acres in Peoria, QTS purchasing the 206-acre Hermosa Ranch Tech Campus in Avondale, and Compass Data Centers purchasing 121 acres in El Mirage. • Aypa Power secured a $398 million financing package for its 250MW/1,000MWh Pediment BESS project in Mesa, set to be operational in 2026, with Société Générale leading the financing and SRP committing to a 20-year tolling agreement. • Vantage recently held a toppin-out ceremony for its AZ14 data center in Goodyear, Arizona, which is part of a larger campus containing 176MW of capacity. In line with current trends, the facility has been 100% preleased since 2023. • Data center master plan developer Tract Group moved forward with purchasing a new 2,069-acre site for data center development in Buckeye, Arizona, after the developer withdrew its previous application to develop a smaller 1,400-acre site in Maricopa County. The new site will support up to 20 msf across 40 data center buildings, with Tract working with the local utility to secure 1.8GW to power the expansive site. The project is expected to be built out in multiple phases over the next 15 years, represents a $20 billion investment, and is expected to create 500 full-time jobs once complete.

CUSHMAN & WAKEFIELD | AMERICAS DATA CENTER MARKET OVERVIEW